In that spirit, I am pleased to present an interview with Andrew Davison, the Chief Marketing Officer (CMO) at B-Cycle, the company that sold Denver its bike share program and is supporting Denver Bike Sharing in managing the program.

Bikeway Central – Thank you for agreeing to this interview, Andrew. Can you start by giving everyone a bit of background on B-Cycle as an organization?

Andrew Davison – B-Cycle is a joint venture partnership between [healthcare company] Humana, Trek bicycles and Crispin Porter + Bogusky [CPB, advertising and design agency]. B-Cycle is the national entity that designed the B-Cycle system for Denver and is in the process of selling that system to municipalities, corporate campus or universities that could benefit from a bike share system.

As a health insurance company, Humana understands benefit of the health and wellbeing. As a bike company, Trek is in a position to develop a bike uniquely suited for this application. CPB has the ability to understand proper positioning and branding, create the industrial design for B-Cycle docks and kiosks. CPB also handled all the marketing, advertising, the creation of a front-end digital platform, as well as the mobile and social components. Each partner brought something unique to the table, but we are all driven by a desire for culture change that would meet outstanding needs around health, the environment, transportation, pollution and traffic congestion. By banding together, these three partners home to bring solution that already exists in various European cities. The fact is that the USA is a little behind the rest of the world in understanding the benefits of bike sharing for urban environments.

Bikeway Central – Can you sketch out a rough timeline of how B-Cycle brought bike sharing to Denver? What is the scope of the current program?

Davison – The company’s genesis started with Humana, which set up a nonprofit entity to promote European bike sharing concepts at the Democratic and Republican National Conventions in 2008. Humana arranged to sponsor bike usage and bike rental at the conventions. Delegates could pick up bikes on loan and use them.

At the same time, some key people at CPB had visited Europe and thought that European bike sharing programs were really interesting. These CPB people thought that their company should try to implement a bike share program in Boulder [where they have an office] and make a difference on their home turf. Bikes Belong, an industry group, encouraged Humana and CPB to speak to each other and to bring in a bike company. We talked to Trek and it turned out they were interested. So we decided to form an LLC for-profit company [i.e. B-Cycle].

Based on the experience with bike sharing at the Conventions, B-Cycle decided that the prototype bikes needed to be recalibrated, so the racks, kiosks and bikes were all redesigned by the first quarter of 2009. Meanwhile, B-Cycle started conversations with the City of Denver building on pre-existing relationships that the city government had with Humana and the Democratic National Convention. Denver is a pretty progressive city, so they were excited about the opportunity to be the first in the nation at bringing a full-scale bike sharing concept to market.

We had some seed funding and leading citizens like Ken Gart of Specialty Sports Ventures led the charge on the private sector side. Denver was committed to doing this and becoming the first customer for B-Cycle. At that time, the City of Denver decided to form a non-profit entity called Denver BikeSharing to which it allocated funds to purchase equipment from B-Cycle.

B-Cycle is a national entity that is now engaged in discussions with numerous cities. We just won a contract in Broward County to implement a bike share program in the Fort Lauderdale area. We do have one main Canadian competitor that has implemented bike sharing in Montreal [BIXI].

Over the next couple of years, I’m confident that we will see bike-sharing programs implemented in a number of U.S. cities.

Davison – We’re putting a big piece of infrastructure into an urban core environment. In Phase One, we’ll have 500 bikes and 50 stations in a fairly limited area.

Next year, we will move forward with Phase Two – another 50 stations, another 500 bikes.

The total number of bikes can vary by city, but we envision Denver supporting 1500 to 2000 B-Cycle bikes in the near future. Of course, we could scale beyond that number depending on how large a service area the program encompasses, but we believe that 1500-2000 bikes would be sufficient to serve an area with approximately 500,000 to 600,000 people.

Different cities will of course have different utilization rates. In some cities, bikes will used for an average of 3 rides per day. Other cities, will see closer to 7 or 9 rides per day. That usage number will have an impact on how many bikes you need to reach market saturation.

It is important for cities and residents to realize that that are longterm investments in transportation systems. What happens in the first year or two is not necessarily indicative of the 10-year curve.

Bikeway Central – I hope other cities might be interested in following Denver’s lead on bike sharing. Can you give an idea of what it takes to run a program of this size? How many people do you have working on the program? What sort of costs were involved in setting up the program and maintaining it?

Davison – There are many variables depending on factors such as geography and seasonality. On average, cities can count on needing approximately one employee per 60 bikes. If the city sets up its own nonprofit organization to run the program, then the nonprofit will have an executive director and probably someone to handle bookkeeping tasks. On the operational side, you will have some maintenance workers and fleet managers who focus rebalancing field, what we call “operational rebalancing.”

The bike fleet is of course moving around within a geographic area as people use the bikes, so inevitably it will get unbalanced without proper intervention. Paris has the largest and oldest bike share program, so we have a lot of data from there. In certain areas of Paris, it turns out that bikes get ridden downhill. Very few people ride uphill compared to how many ride down. They all get parked at two or three stations at the bottom of the hill and have to be rebalanced back up the hill.

So cities should count on having approximately one employee per 60 bikes, plus the operational overhead of putting together and managing a nonprofit. It is important to note, however, that the system can pay for itself through both operational and sponsorship revenue. The goal is not to plaster the bikes or stations with NASCAR-type advertising, but sponsorship is an important component of the program as it allows corporate entities to get unique brand exposure. The way the system is set up and the technology involved generates a wealth of data that is beneficial to the riders, the city and the advertisers. The inventory itself – the bikes, the stations and the digital properties associated with the bike share program – provide quite a lot of opportunities for consumer touchpoints.

As for program implementation, I would say that using the phased approach as Denver has just makes sense. It reduces the size of the initial capital outlay. But when you’re thinking of the capital costs of bike sharing, remember that the average city bus has a $300,000 to $400,000 capital investment, plus yearly operating costs (driver salary, gas, upkeep, insurance, etc.). A bike share system can actually be an extremely affordable part of the transportation solution when you look at the alternative costs associated with cars, buses and trains.

Bike sharing does not actually replace these other means of transportation. We’re not anti-car, anti-bus or anti-train. Bike-sharing is intermodal. It gives cities the ability to build out their transport system and solve last-mile problems. Let’s say that I want to take the bus, but I currently have to walk a mile and a half from the bus stop to my home. Or I get into the city on the train, but then I have a two-mile walk to my office. Bike sharing can be effective in solving intermodal transportation issues.

Bikeway Central – Do you expect bike sharing to pay for itself in Denver? In other words, is an efficient and well-managed bike sharing program an expense or a potential profit center for a city? Compare to bus fare box subsidization

Davison – I believe that bike sharing can potentially be a profit center, but the first goal is operational efficiency, the next goal is break-even and then the goal can be profitability. We are talking about a significant culture change in terms of behavior and transportation dollars. Cities have to look at bike sharing pragmatically as a long-term investment. I think bike share programs can be sustainable and profitable through a mix of user fees and sponsorship dollars.

It is important to note that most existing transportation systems require a heavy amount of subsidization. I don’t believe that bike sharing will fall into that category in the long run. We don’t have financial data from other programs, but we do have usage data and the modeling we have done based on that usage data supports my projections that bike sharing can be sustainable or even profitable in the long term.

But you do have to build up the system first before you can get to break-even. You have initial capital investments that have to be amortized. If you break out the capital investment, we feel that operating expenses can be covered by operating revenue fairly quickly. The bottom line is that we do not envision bike sharing as something that would have to be subsidized over the long term by cities or municipalities to make it effective.

In part our projections are based on the belief that bike sharing does really provide a unique vehicle for sponsors. Not only do sponsors have their messages on a physical object, but this object then traverses the city, providing great exposure for the sponsor’s message. The entire bike share system provides sponsors with a mobile asset (the bike), a fixed physical asset (the station), as well as digital assets (Web, mobile and social) and a host of metrics, so we really enable sponsors to cover all their bases.

The challenge is that bike share networks do not really exist in the marketplace, so they are hard for potential sponsors to categorize. It’s just another example of the adoption curve over time. Even since the launch in Denver, we have seen increased momentum across board regarding interest in bike sharing.

Bikeway Central – How does the B-Cycle / Denver program compare to programs in other cities in Canada, Europe or elsewhere? Have you applied lessons learned from these earlier programs? Do you think you have improved on them in any way?

Davison – We have studied them as relates to mechanical features and how they have constructed docks, kiosks and bikes. Maintenance and fleet management is critical component – the equipment has to be fun, but also durable. We feel that we have learned numerous lessons all across the design spectrum. For instance, B-Cycle bikes include a patent-pending hard locking system. We have taken the additional step of making our bikes the most technically advanced by including GPS and bike computers integrated into each vehicle. These tools serve a dual function – they can give users a variety of metrics (calories burned, speed, etc.), but they can also help from a municipal and corporate standpoint in terms of efficiency and fleet management. Operationally, we have looked for areas of improvement around marketing and digital components of the system. This is a young industry. There are a lot of smart players driving hard and innovating. We’ll continue to tweak and build on our system as we move forward.

Bikeway Central – Is the program meeting your expectations so far? Do you have any facts and figures on members, bikes checked out, etc.?

Davison – It has only been a few weeks since launch, so we have not yet released any aggregate data yet. We’re really in a beta phase right now. We’ve just rolled out a significant piece of technology and as much as you like to test your products, you still can’t fully predict how it will fare in a real-world environment. So we’re still optimizing all aspects of the system.

As I travel around Denver, I do think the responses are overwhelmingly positive. There is a high degree of civic pride about being first in nation to have bike sharing at the scale of what launched in Denver. I’ve heard of restaurants offering discounts to people who roll up on B-Cycles. In the last couple of years, we’ve undergone a number of economic challenges and political changes. I think we are in a period where over the next 10-20 years, we’ll see even more changes in our society and people see this as part of the solution, so they’re fired up.

I have been involved in this B-Cycle project for two years and I have to say that it was really exciting when we started to see stations appear on all the street corners. It really drove it home to me that we are changing the urban environment. We are installing kiosks and stations throughout city. You cannot travel in certain areas of Denver without seeing B-Cycle bikes and kiosks. If you come to Denver from another city, you’ll walk around say what’s going on? What is this? There are 500 red bikes! It’s that prevalent.

We are thrilled with the response and the excitement and the momentum so far. Nothing speaks to this momentum more directly than the fact that a week after the B-Cycle launch in Denver, Broward County and Fort Lauderdale chose B-Cycle as vendor to come and put in a bike share system. We plan to get that system in place within the next calendar year, but have to do it right. If you rush it, you’ll pay for it in the long run.

Bikeway Central – Have you encountered any unexpected challenges, for instance in keeping stations supplied with bikes? If so, how have you overcome or dealt with these challenges?

Davison – Proper balancing of the system is an important issue. You have to be staffed appropriately to meet your customer needs up front and make sure your bikes are well-distributed. There are however a couple of ways to get around the distribution problems. For starters, B-Cycle stations have excess parking spaces amount to one and a half times the bikes allocated to that station (i.e. a station with 10 assigned bikes would have 15 parking spaces). At night, an operational crew redistributes and maintains the fleet as necessary.

But there are other ways to address the balancing issue. If the station is full, we’ve developed technology that lets the user call an operator, who can digitally confirm that the station has no free parking spaces. The operator can allow the user to terminate the bike sharing session (preventing usage free accrual). The user can lock the bike, the operator can verify the bike is locked and the operator can send out an operations employee to pick up the bike and move it to another station that has free parking spaces.